Can a Chapter 13 filing help graduates struggling with loans?

On behalf of Goldman & Beslow, LLC posted in Chapter 13 on Thursday, August 27, 2015.

Can a Chapter 13 filing help recent graduates struggling with student loan debt? Although higher education may help many graduates obtain employment in their chosen field, a starting salary may not be enough to sustain debt management and a home life with children.

By one estimate, a 30-year repayment plan for student loan debt results in paying tuition and living costs several times over. With a middle-class income, recent graduates with six figures of debt fear that they may never be able to pay back their educational loans. One commentator provides the rule of thumb that student loan debt should not exceed a graduate’s starting salary. Yet how many graduates can expect that in their chosen field?

Savvy readers might recall that a Chapter 13 bankruptcy filing will not discharge student loan debt. According to the website maintained by the Administrative Office of the U.S. Courts, there are 19 categories of debt that are not discharged under Chapter 7 and a more limited list under Chapter 13. Examples of debts that survive a Chapter 13 filing include domestic support obligations, some types of taxes, some criminal fines, student loans and some debts arising from fraud.

Yet a Chapter 13 can still those struggling with student loan debt. By placing an individual on a repayment plan that is appropriate to the debtor’s income, student loan payments might be lowered to a more manageable monthly payment amount. The reorganization provided by a Chapter 13 filing might only last for five years, after which debt payments may go back to their original amounts. Yet five years of relief might be all it takes. Check out our firm’s website to learn more about what a Chapter 13 filing can offer.

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